The UK’s failure to rebalance its economy leaves it vulnerable to an exit from the EU, leading fund manager James Anderson has said.

Mr Anderson, co-manager of the UK’s biggest investment trust Scottish Mortgage, said there were concerns over the UK’s failure to spawn “serious long-term manufacturing and serious new companies”, adding that a vote to leave the EU could weaken its attractions further. “Britain has been very much the favoured child of the financial institutions and investment banks....if we really do vote to leave Europe the financial markets would feel more uncomfortable with that.”

Chancellor George Osborne’s new year warning that the economy faced a ‘dangerous cocktail’ of external threats sounded like “an attempt to distract from deep internal problems”, Mr Anderson said.

Talking later to wealth managers and investors in Edinburgh, the outspoken veteran manager said the panic in the Chinese stock market did not reflect any new economic reality and should not disturb investors.

But he warned that the turbulence in China could undermine its government. “It’s quite conceivable that the perceived crisis carries on getting worse and turns political, and that the Chinese Communist Party is not inviolate over the long-term.”

China’s big three internet companies Alibaba, Baidu and Tencent, like their US counterparts Amazon, Google and Facebook, all of them among the biggest holdings of the £3billion trust, were becoming ever more powerful, Mr Anderson said.

He told the forum: “We think these companies are so all-encompassing, so profitable, have such control over people’ lives, that their power may well be greater than that of most states. If they play their cards right, there is an increasing chance that they set the agenda of how the world develops.”

The trust was marked down by over seven per cent in the first four trading sessions of the new year but Mr Anderson said: “There is no logic to going out and selling the type of companies that we own.” He added: “There will be volatility, and I don’t know whether this year will be up or down, but I do think there is a huge amount of change going on underneath it.”

The outspoken manager told the forum that the underlying issue for investors was that 2015 had effectively “transformed the world” in the convergiance of the mobile internet with the consumer, in the power of social networks, and in breakthrough developments in healthcare and energy which would in time sweep away established industries.

“We are increasingly living in a world where the definition of risk .....has become malignant and dangerous, and that has got to a position where the entire institutional investment world of the West has completed failed and collapsed into uselessness.”

He told the audience of Scottish Mortgage investors and advisers: “It is not very popular saying that to institutional clients but the retail world is more sensible about this.”

Mr Anderson said he had analysed the world’s 100 biggest companies, supposedly the safest havens for investors, and believed that 69 of them had no long-term future. “Those people who own everything from Glaxo to BT to BAE, the behemoths of the UK market, are going to be severely disappointed, I think our portfolio is much safer for the long-term. The notion that the index will do well is one that will be seriously challenged.”

On oil, the manager went on: “We have reached a point of no return. In the long-term, the fossil fuel age is dead....all those big oil companies in the west are completely doomed and bankrupted, which is terrible because according to the FCA they form large parts of the indices and they can’t die.”

Tom Slater, the trust’s co-manager at Baillie Gifford, said the idea of established companies “adopting technology” while others were “technology companies” was completely unhelpful. “We have to be a lot more precise. The mobile and consumer internet has already transformed the retail and advertising industries and we think it’s moving out to affect a much broader section of the economy.”